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We roll towards European trade with crude sharply repricing geopolitical risk, with energy traders continuing to unwind hedges placed on the threat of Iranian oil supplies being affected in the process.
The market initially reacted to the reports that Israeli Prime Minister Benjamin Netanyahu would concentrate his operations on Iranian military targets in late US trade, with Brent hitting a low of $74.86.
With the crude price failing to bounce through Asia, consolidation was the play, where we saw a tight range for much of trade, however, we’re now seeing sellers regain composure with price breaking through the US lows, with a mix of stops being taken out, and momentum-focused traders working in line with the flows.
The demand side of the equation also seems to be in play with OPEC projecting weaker demand forecasts, and if the HK50 and CSI300 are a voting mechanism on the Chinese fiscal measures, then heavy equity markets seen through cash trade are hardly inspiring the oil market either.
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